Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL) of the House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party, along with U.S. Senators Marco Rubio (R-FL) and Chris Coons (D-DE), have expressed significant concerns regarding MSCI's decision to remove its forced labor red flag for Volkswagen's factory in China.
The Volkswagen factory in Xinjiang has been associated with Uyghur forced labor, which has raised issues about modern-day slavery affecting supply chains and benefiting the Chinese Communist Party. This prompted MSCI, an American finance company, to issue a “red flag” rating for Volkswagen in 2022. However, MSCI recently lifted this rating based on what lawmakers describe as a flawed audit.
In their letter to MSCI's President, the lawmakers state: "As you are aware, the Chinese Communist Party (CCP) is currently committing genocide against Uyghurs and other predominantly Muslim ethnic groups in the XUAR. The CCP has subjected these populations to detention, forced sterilization, forced abortion, brainwashing, and several forms of forced labor. As a result, the XUAR operates what experts assess to be the world’s largest contemporary system of state-imposed forced labor, with more than two million people at risk."
They further note: "Despite widespread concerns surrounding the audit, including concerns from the auditors themselves, MSCI decided in December 2023 to lift the 'red flag' rating on Volkswagen. Volkswagen has continued to partner with certain companies in the PRC that appear to use forced labor since the lifting as well."
The letter addresses Mr. Fernandez directly:
"We write with regard to MSCI’s decision to lift its 'red flag' rating for Volkswagen’s jointly-owned facility with Beijing’s state-owned SAIC Motor located in the Xinjiang Uyghur Autonomous Region (XUAR) in the People’s Republic of China (PRC).
As you are aware, the Chinese Communist Party (CCP) is currently committing genocide against Uyghurs and other predominantly Muslim ethnic groups in the XUAR. The CCP has subjected these populations to detention, forced sterilization, forced abortion, brainwashing, and several forms of forced labor. As a result, the XUAR operates what experts assess to be the world’s largest contemporary system of state-imposed forced labor... Congress responded by passing the Uyghur Forced Labor Prevention Act... prohibiting goods produced wholly or partly in XUAR from entering into U.S.
MSCI initially added a 'red flag' rating on Volkswagen due to its activities in XUAR but later relied on an audit by Lӧning GmbH that found no indications of exposure to forced labor despite using local law firms for inspections without unsupervised checks or interviews."
The letter also highlights internal criticism within Lӧning GmbH regarding their methodology: "Shortly after release... staff revolted... stating that 'no other team member' besides Lӧning participated... Lӧning acknowledged challenges collecting data."
The lawmakers seek detailed answers by June 21 about MSCI's methodology for lifting ratings like Volkswagen's and potential re-imposition given ongoing concerns over audits indicating possible use of forced labor.
